Asia stocks fall after Fed says more US rate hikes likely

Beijing, Nov 3 (BNA): Asian stock markets fell on Thursday after the Federal Reserve raised recession fears by saying it had not finished raising US interest rates to cool inflation.

Hong Kong lost 3.1%. Shanghai, Seoul and Sydney also followed Wall Street lower after the Federal Reserve on Wednesday raised its key interest rate to a 15-year high.

Oil prices fell while the Euro remained below 99 cents.

Wall Street’s benchmark S&P 500 fell 2.5% after the Federal Reserve raised its short-term lending rate by 0.75 percentage points, three times its usual margin, for the fourth time this year, according to the Associated Press.

Federal Reserve Chairman Jerome Powell reinforced expectations of a rate hike, saying “we have ways to go.” He said it would be “premature” to consider stopping.

“Recession risks are rising, but that is the price the Fed is prepared to pay to control inflation,” James Knightley, Padrake Garvey and Chris Turner of ING said in a report.

Hong Kong’s Hang Seng slipped 488 points to 15,338.85 and Sydney’s S&P-ASX 200 slipped 1.9% to 6,855.40.

The Shanghai Composite Index fell 0.2% to 2,997.46. Japanese markets are closed for a holiday.

The Kospi index in Seoul fell 0.6% to 2,322.11. New Zealand and Southeast Asia markets also declined.

The Federal Reserve and central banks in Europe and Asia have aggressively raised interest rates this year to stem multi-decade inflation. Investors are concerned that the global economy could be pushed into recession.

US consumer prices rose 6.2% from a year earlier in September, the same as the previous month. But core inflation, which excludes volatile food and energy prices to give a clearer picture of the trend, accelerated to 5.1% from 4.9% in August.

The Fed said on Wednesday that it may switch to a more deliberate pace of raising interest rates and will consider the overall economic impact.

On Wall Street, the S&P 500 fell to 3,759.69. The Dow Jones Industrial Average lost 1.5% to 32147.76. The Nasdaq Composite Index fell 3.4% to 10,524.80.

Shares of technology companies, retailers and healthcare companies were among the biggest decliners.

Apple shares fell 3.7 percent, Amazon.com Inc fell 4.8 percent and Johnson & Johnson 1.5 percent.

The two-year Treasury yield, an indicator of market expectations of the Fed’s action, rose to 4.58% from 4.55% before the Fed statement. The yield on 10-year Treasuries, used to determine mortgage rates, rose to 4.10% from 3.98%.

Investors are hoping that signs of weak home sales and other activities may encourage Federal Reserve officials to soften plans to raise interest rates. But recent data, especially on employment, is relatively strong, a sign that the Fed may remain aggressive.

Data from payroll processor ADP showed that companies added jobs at a faster pace in October than expected.

The government is due to release unemployment data on Thursday and a report on the broader job market on Friday.

In energy markets, US crude lost 43 cents to $89.57 in electronic trading on the New York Mercantile Exchange. The contract rose $1.63 to $90 on Wednesday. Brent crude, the price basis for international oil trade, fell 27 cents to $95.89 a barrel in London. It rose 1.51 dollars in the previous session to 96.16 dollars a barrel.

The dollar rose to 147.33 yen from 146.94 yen on Wednesday. The euro fell to 98.26 cents from 98.83 cents.

HF